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Philadelphia Fed president discusses “skills-based hiring” and March’s rate hike

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"I could be supportive of a 50 basis point rise in the future — but not at this meeting," said Patrick Harker.

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In the 15 months following the onset of the pandemic, many employers have lowered the educational requirements for certain jobs, according to a new report from the Federal Reserve Bank of Philadelphia — potentially signaling new opportunities for workers without a bachelor’s degree.

“We’ve seen this trend before, and that’s just accelerated through this pandemic. Companies are now looking and saying, ‘Do I really need the proof of that credential? Or do I really look for proof that you have the skills necessary to do the job?'” said Patrick Harker, the bank’s president and chief executive officer, in an interview with Marketplace’s David Brancaccio.

Harker spoke with Brancaccio about the implications of the research for the broader economy, as well as whether Russia’s invasion of Ukraine and the resulting economic fallout could change the Fed’s calculus about raising interest rates in March. The following is an edited transcript of their conversation.

David Brancaccio: What do you make of this — it looks like you may not need all the education you once needed to find a job these days?

Patrick Harker: What we found is that the recent volatility in the labor market, brought on by the pandemic, of course, has affected a lot of things — including employment opportunities for non-college jobseekers; people who have not completed a four-year college degree. We’ve seen a lot of postings increase. And I’ll give you one example of that: that if you look at the five quarters before the pandemic hit and then the five quarters after the pandemic hit, there were 2.3 million more postings for jobs that pay above the median wage in this country — a little over $36,000 — that are accessible to workers without a four-year college degree. Much of that increase was due to companies looking for workers and reducing their educational requirements. However, around 38% of the increase of 2.3 million jobs was companies lowering those educational requirements.

Brancaccio: You’re saying a significant number of the job postings are because the employers, in the face of a labor shortage, are saying, “OK, well, we’ll try giving this to someone who doesn’t have that college degree.”

Harker: Yeah, absolutely. We’ve seen this trend before, and that’s just accelerated through this pandemic. Companies are now looking and saying, “Do I really need the proof of that credential? Or do I really look for proof that you have the skills necessary to do the job?”

Brancaccio: For someone who doesn’t have a college degree and is trying to make ends meet, this is a very good thing. But is one of the lessons here that you don’t need a college degree?

Harker: No. I mean, we are a big economy, a big diverse economy. I am very much against this one-size-fits-all, everybody has to do the same thing [mentality]. It’s just not who we are as a nation. So some people need a college degree, some people don’t. And there are lots of opportunities for people with degrees and people without degrees. That’s what we’re trying to say. Follow what you think is right for you — but you need the skills. Whatever you’re going to do, whether it’s going to college or learning a trade, you need to get skills.

Brancaccio: Is this a feature of late 2021, early 2022 and the standards will snap back up, or could this persist?

Harker: That’s a good question. We don’t know exactly the answer to that question right now. I mean, it is cyclical. We’ve seen this in the past; when labor markets get really tight, educational requirements come down. So how much of that will stick through the recovery from the pandemic? Not sure yet. My sense, and I can only say my sense is, some of it’s going to stick — because, again, there was this longer-running trend of companies already looking to do skills-based hiring.

Brancaccio: You’re using a certain phrase, “skills-based hiring.” You’re not saying “lowering standards.” That’s a different thing.

Harker: No, it’s a different thing. Instead of saying, “I have a college degree and a certain credential,” I can prove I know how to do certain things: “I know how to code” or “I know how to wire a house as an electrician.” There’s certain things I know. And, again, there’s credential you can earn along the way — sort of micro-credentials to prove a specific set of skills — but overall, you may not need a four-year college degree to prove that.

Brancaccio: There are 12 regional Fed banks; yours is one, Philadelphia. You’ve carved out a bit of a brand here in thinking about matching people without college educations to jobs. I remember we have talked about this — you have a tool; I think it’s still online.

Harker: Yeah, the Occupational Mobility Explorer is online. We’ve had tens of thousands of people come to our web site to learn about the tool; some people have come more than once, and it’s great. The team is very happy to see this being used by individuals; by people planning for workforce training programs to see, in their region, what are those jobs, what’s available, and how can we get them the skills necessary to move up the economic ladder — for them, for their families and for their communities, and ultimately for all of us; our economy.

Brancaccio: Now, the state of hiring and the job market at this moment is one of our top stories, but another one is the effect of geopolitical events on the wider economy. Many realignments are happening now in the world since Russia’s invasion of Ukraine and the resulting sanctions — oil went above $100 a barrel this week; Russia and Ukraine are big exporters of, for instance, wheat; cargo by air and ship are affected. What’s your sense — does all of this change the calculus for the Fed’s big interest rate decision that could come this month?

Harker: I can only speak for myself. Clearly this tragedy — and it is an incredible tragedy that’s befallen Ukraine, and really all of us; and hopefully, God willing, this will be over sooner rather than later. But that said, we still have to deal with, in this country, most notably, inflation. So I am supportive of moving methodically on raising the Fed funds rate. I am supportive of doing that with a 25 basis point rise this month, and then can continuing to move forward with increases. But, do it in a way that we recognize the risks; the global risks that have now just gotten worse because of the Ukraine situation. I think we have to be careful here, but at the same time, we need to move the rates up.

Brancaccio:  There’s been some talk of more than 25 basis points, a quarter percent — maybe half a percent. But I’m hearing that if it were up to you, not quite that briskly, that fast.

Harker:  Well, I wouldn’t take it off the table for a future move. If we don’t see any movement downward on inflation, that is inflation continues to be as high as it has been, then I could be supportive of a 50 basis point rise in the future — but not at this meeting. I think we start with 25, let things play out, and see how inflation reacts — and the other risks that we’re dealing with.

Brancaccio:  Now, you live in this world of thinking about how interest rates can tamp down inflation, but it can be a hard paradox for regular people to understand — that at a time when they see prices are going up for all sorts of things, that the proposed antidote is to make something else more expensive: borrowing. But, that is the lever you use.

Harker:  Yeah, I mean, money is a good in that sense, and it has a price. And so if there’s a demand for good, you raise the price, and you lower the demand. Money works exactly the same way.

Brancaccio: On Russia-Ukraine — this is maybe one of the biggest geopolitical crises of our century here, but do you see systemic risks to the financial system caused by this biggest military campaign in Europe since the Second World War?

Harker: Not at this point, in my view. However, it is disrupting the global economy right now, and it has the unfortunate ability to make it worse. So hopefully we can resolve this quickly, first and foremost, for the people of Ukraine, so that they are safe. But ultimately, we need to deal with some of the problems that generated this. And I’m worried, but I don’t see at this point, it creating a systemic problem for the global financial system.

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